CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 58% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Click here to read full risk warning

Back to Blog

Using Artificial Intelligence to Improve Your FX Trading Strategy

   

artificial-intelligence-forex

The forex market has always been keen on embracing innovations in the technology, software, and Internet industries. The way the forex market has fully transitioned to electronic trading over the years is a prime example of its willingness to change. The latest technological development to take the world by storm is artificial intelligence, and it’s not escaping the attention of the forex market.

What Is FX Artificial Intelligence?

Growing in leaps and bounds in recent years, FX artificial intelligence is currently able to take human decision-making out of the trading equation. Instead, market moves are based on adaptive and learnable algorithms. What artificial intelligence does is look at the first algorithm in a given suite and analyze any relevant data points within it. Essentially, the AI will sweep across all of the integrated algorithms, looking for the best way to fill the order, learning as it goes. It’s fair to say that AI has the power to change the world of forex trading.

How AI Can Influence Technical Analysis

Technical analysis focuses on two things: volume and price analysis. It makes sense that AI technology can assist here, because it can learn from patterns and develop algorithms that change depending on the situations that arise. The return on investment should be great when it comes to this technology, because AI can manage all data. When used appropriately, AI should be able to provide traders with more accurate market analyses due to tighter data control.

How to Use AI when Trading

When it comes to AI-based trading, you’re going to find many companies that claim to be using AI-based forex trading methods or related software. There is a growing appetite for this in the market—hence why you’re looking to use AI to improve your own forex trading strategy. Many of these AI-based systems, such as the MT4 focused Forex Artilect, are finding an audience among active traders. The evidence behind the likes of Forex Artilect is that they attempt to differentiate themselves from other trading systems through the use of AI. Most major commercial trading systems—and there are a huge number out there—lean on linear fundamental methods and lagged technical indicators. Forex Artilect uses AI as a means to overcome the many issues that this can present, with its returns indicating that its methods work. Currently, Forex Artilect trades four major currencies, holding positions for just a few days on average. Through backtesting, it has generated $100 million from an investment of $10,000 in just two years.

You’ll find that the key to a successful forex trading AI integration is providing proper algorithms that the AI can use, build on, and eventually learn from. The focus should be on long-term investments, because this is where AI will shine, but AI can influence short-term trading, as well. With the introduction of AI, there will also be a decrease in luck-based trading, due to the fact that AI-based trading focuses intently on data mining and algorithm study.

When you implement AI, you’ll find that it is able to learn from previous trades in ways that humans can’t really process. The value of machine learning isn’t even in the algorithms that we’ve mentioned—it’s in the indicators. Human-based investing and trading have indicators that are ultimately limited, and we often use the same type of market indicators over and over. For AI, the sky is the limit—the benefit in the long-term is astronomical.

AI Forex Trading Benefits

There’s an undercurrent of fear that AI will replace manual forex trading, but this is not likely to be the case. There will still be people trading the fundamentals—after all, machine learning and artificial intelligence, including their strategies, will be created by humans. It’s likely that fundamental models will actually combine with AI. That being said, there is a huge investment occurring within the field, with a study from Opimas showing that current spending on AI technology has topped $1 billion and could reach up to $2.8 billion by 2021.

The benefits of AI far outweigh the drawbacks: error reduction, efficiency enhancement, and more—the list seems endless. Even now, when AI-based trading is still in its formative years, we are seeing individuals and trading advisors find success.

Mediatrix Capital is an early AI adopter. It was experimenting with the technology as far back as 2013. Using it as a means to trade currency, gold, and silver, its track record is hugely impressive. Between December 2013 and April 2017, Mediatrix Capital achieved 40 back-to-back months of client gains, earning more than 150 percent in returns over a three-year period.

Conclusion

AI is no doubt going to become an important part of the upcoming generations of forex trading, due largely to the massive benefits that come with using this new technology. Benefits include reliability in compliance with regulations, a reduced margin for mistakes, improved customer service, efficiency, and more. AI will learn from every trade and eventually be able to overcome the risk. In addition, machines can operate 24/7, and do not need to rest. As we mentioned earlier, the investment in AI trading is showing impressive growth, with notable market voices such as Joséphine de Chazournes (Celent Senior Research Analyst) keen to discuss its enormous potential. Taking the current and future benefits into account, there is no time like the present to start integrating AI into your forex trading efforts.

trading-strategies-guide

Disclaimer:

The information provided herein is for general informational and educational purposes only. It is not intended and should not be construed to constitute advice. If such information is acted upon by you then this should be solely at your discretion and Valutrades will not be held accountable in any way.

Comments